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For give my ignorance but what is a Hybrid trust and how does it differ from a Discretionary Trust?
John
Hi,
Sorry about the delay in replying to your last post.
We borrowed the 20% deposit from money partners. This is a short term project so the cost of borrowing the additional money is a big factor in the profitability.
We have a spreadsheet that we plug the project financial figures into. We factor in cost of sub-division, cost of reno, cost of borrowing and the likely return when we sell. We try to over estimate the costs and under estimate the return. If the deal is profitable with these figure then it should be even more profitable when we use real figures.
Hi
We interviewed several banks before settling on the NAB. They had a centralised lending area and gave us a dedicated personal banker who would come to us to get documents signed and would bend over backwards to help. Last year NAB 'improved' there service to us and got rid of these personal bankers. We now have tthe local branch manager as our personal banker. She is too busy running the branch to give us the service we used to receive from our other personal banker.
The moral of this post is that no matter how good your bank is now someone will improve your service and screw it up!! I think you have to share your business around several banks and don't be afraid to take your business elsewhere if you're not happy.
John
Hi,
We have a trust structure and have borrowed 80% LVR from NAB for two 'buy and holds'. We also borrowed 80% of final value using the trust for a two unit development in Adelaide. We lent money at the current rate without any penalties. We did have to give a personal guarantee for each of the loans.
The only negative with the NAB was that they put a condition on the trust that we couldn't borrow money from any other source (how did that one get through?) which caused us a problem when we went to RAMS to borrow 80% LVR for another piece of land in Adelaide. RAMS had no problem lending our trust 80% of final value for the construction of four units on this land.
regards John Wright
One way to get a greater return than just a straight reno is to find properties where you can add value in different ways. For example adding another bedroom can increase the value of a property by much more then it costs to build. You could buy a reno where the block may be sub-divided and raise extra cash that way.
In response to Scott No Mates comments – what idiot would pay $300k+? It seems the current market in the South Eastern suburbs of Melbourne is full of idiots. Houses are being sold for $50,000 – $100,000 more than the asking price in this price range. We've put many offers in on reno properties at more than the asking price and been beaten by up to 10 couples putting in higher offers.
We've found that by keeping in contact with real estate agents and telling them exactly what we wanted we were told about a problem property before it went to the internet. That way we were able to make the first offer and beat the crowds. We settled on it yesterday and will start the reno this weekend.
SumnerStephen my advice is to keep at it. You have to earn your money in the first few deals you do but it gets easier the more you do.
Good Luck.
regards John
Hi Alastair,
We've just bought an IP which we are going to renovate and sub-divide the block. This is our first IP project done completely on 'other peoples money'. We expect it to be completed within 6 months (although the subdivision will take longer). We wanted short term borrowing and approached some friends to become money partners. They agreed and we got a solicitor to draw up a loan agreement contract which both side have to sign. This is essential to protect both parties (especially if there is any other relationship between the parties ie if they are friends or relatives).
We initially approached a solicitor and were offered 66% at 8% pa. but due to the solicitors lack of professionalism and warnings by other professional that he had been 'struck off' twice and couldn't legally arrange the mortgage (we checked this independantly and found it to be true) we pulled out. We approached a second tier lender and arranged an 80% mortgage at 9%. Even building in the higher interest charges the deal still makes a great deal of money and we haven't had to put any money down. We will manage the project and do some of the work but essentially we make the profit without any costs!!
Good luck in finding funding, there's plenty of it out there. If you believe in yourself other people will believe in you.
regards John
Hi, we've sold one of IPs privately. We got our conveyancer to draw up a contract of sale and when the buyer gave us the deposit cheque, it had to be deposited in a solicitor's trust account (which attracts an additional cost). Doing this gave us a legally binding contract with the Buyer and protected their deposit as we never didn't get the money until settlement.
I'd advise you to talk to a solicitor or a conveyancer and put a similar arrangement in place. This will protect you and your vendor and isn't expensive. It cost us about $150 to have a contract drawn up and a couple of hundred (i can't remember exactly) to have the deposit held in the solicitor trust account.
We've bought properties in several regional areas across Australia. Some in very small towns (less than 8,000 population) and have had good returns both income and growth. One property we bought 2 years ago, in Charters Towers, QLD, for $68,000 has recently been valued at $170,000. The real estate agent told us not to sell because there is heaps more growth in the area. Another we bought in Norseman, WA has doubled in value in the last two years and is giving us an income of over $3,000 per annum as well.
If you do your research and find the right areas the growth rates (%ages) are just as good as the big cities but without the big capital outlays required with city property. We've invested in Horsham and Ararat and both have experience good growth.
regards John
